Investor Sentiment Survey: Ian's Response

This is a guest post by Ian, who was kind enough to share his responses to our recent investor sentiment survey, in which I asked Have You Lost Faith in the Markets? These are his responses to the 10 questions I asked:

1. Do you feel differently about investing than you did 5-10 years ago?

Yes. I once felt that stock markets were too large to be manipulated – until the crash. The lack of enforcement of regulations means just about anything goes, especially in an environment where the self interest of the power players comes first.

2. If you are new to investing, are you reluctant to get started?

Not new to investing.

3. Have the market crashes of the past 10 years changed your view of investing?

Yes. I was amazed at the number of financial “experts” whose only advice was to “Stay the course!” That is until people suffered considerable losses to their life savings. Then the advice became,”It’s too late to sell now!” It taught me that Buy and Hold is, really, a marketing strategy and, by no means, an investment strategy.

4. Do you trust our government and corporate leaders to act with integrity?

The reason people don’t vote is because they don’t trust politicians in the first place. Why would this time be any different? Too many corporate leaders have already sold out. Not hardly.

5. Are you confident that the financial system is repaired and the economy will recover?

No, the repair has hardly begun. Borrowing is what made a crash out of what otherwise would have been a recession. I can not think of any time in history where anyone used more debt to solve their debt issues. You probably have seen those people on the reality TV shows who are in debt beyond all reason – its called denial. But yes, the economy will recover, eventually.

6. Do you believe today’s markets are structurally different than they were 20 years ago?

Totally. The use of computers to disseminate information, execute trades and create market derivatives has totally changed the structure of the markets. Today, prices quickly adjust to news from anywhere on the planet. They react more quickly than ever, reducing the window of opportunity while increasing volatility.

7. Do you think it’s realistic to expect average annual returns of 7% or better from the stock market, or do you embrace the New Normal paradigm of roughly 2% returns?

In spite of my answer to question 6, I still believe returns in excess of 7 percent are possible. There are products which make money in down markets as well as up. Even a market trading in a range for a period of years has uptrends and downtrends which, while going nowhere, afford us twice the returns.

8. Do you think bonds are any safer than stocks given the age of the current bond bull market?

I believe bonds remain safer, but if we get either hyper inflation or deflation all bets are off!

9. Have you changed your retirement plans based on your answers to the above questions? Will you do so now?

Yes.

10. If you are indeed feeling less confident in the markets, what would it take to restore your trust?

When somebody demonstrates to me they are more interested in me keeping my money than they are in taking it from me, I will begin to trust. Let’s just say I am not holding my breath. They say to keep your friends close, and your enemies closer. I will continue in the markets, but I don’t trust anyone to look after my money without my help.

I wonder how many of you would echo Ian’s sentiment that “Buy and Hold is, really, a marketing strategy and, by no means, an investment strategy”? Recently, Danielle Park of Juggling Dynamite has posted that trading volumes do not support price gains made in July and then asked Where Have All the Buyers Gone? It seems that buyers are either on vacation or purposely not participating in this market. Perhaps, like Ian, they have taken matters into their own hands and are waiting for a show of integrity.

My thanks to Ian for sharing his thoughts here. If you would like to do the same, leave a comment on this post or the original.